A Brief Guide to Starting a Business in Canada

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While most people might move to Canada to seek employment opportunities, some decide to start a business and become employers themselves. However, the process of establishing a business or a company in any foreign country can feel confusing or overwhelming.

In this blog, we will be covering some of the basics regarding starting a business in Canada.

Steps to Starting a Business in Canada:

 1) Establishing an idea:

Of course, the first step in initiating your Canadian business is coming up with a strong idea. Your business idea planning could involve:

  • Outlining the business goals.
  • Understanding market trends.
  • Knowing your competitors.
  • Defining a market niche.
  • Highlighting the core problem that your offering will resolve.

2) Selecting a location:

A number of entrepreneurs kick their operations off from the comfort of their homes, and only consider finding office space once their business has grown enough. However, having a business location is essential for getting your business registered and obtaining the required permits and licenses.

A few factors to consider while picking a location are:

Business requirements.
  • Space layout and size.
  • Environmental issues or zoning restrictions.
  • Target market.
  • Noise levels.
  • Competition.
  • Business environment.

3) Choosing a structure for your business:

Canada offers various business structures, and you need to pick one that suits your business type and needs best. The five primary business structure types are:

a) Sole proprietorship:

A sole proprietorship structure is often ideal for small businesses. Such a business will only comprise the owner, and need not be a corporation. The simplified taxation associated with sole proprietorship businesses makes it a highly popular approach to starting a Canadian business.

b) Partnership:

In a partnership business, you will be teaming up with at least another person to run the business. While a partnership does not have any legal structure, partners usually enter in contractual agreements that define the sharing of responsibilities, expenses, and profits or losses.

c) Incorporation:

Compared to partnerships or sole proprietorships, setting up and running a corporation is considerably more complex. A corporation is a legal entity that is separate from its owners, which means that the owners will not be liable for any debts associated with the business. However, if you run a corporation, you will be expected to maintain detailed records and also submit a yearly report to the authorities, outlining your business’ financial position.

d) Cooperative:

Cooperatives are incorporated businesses operated by people possessing common needs. The various types of cooperative businesses in Canada include worker, multi-stakeholder, producer, and consumer.

e) Non-profit:

A non-profit business’ main objective is to benefit its community, such as a charity or a sports club. You can create a non-profit Canadian business in pretty much the same way you would create any other type of business in the country.

4) Naming the business:

Determining the right business name is crucial, and here are a few factors you should consider before picking a name for your business:

  • The name should reflect your business’ offered service or product.
  • Must be easy to pronounce and remember.
  • Should be unique so as to avoid any legal problems or other confusion.

You will also have to see if your chosen name is available and not already taken. Remember that the Canadian government prohibits using a business name that is already in use. In fact, you are not allowed to choose a name that is even similar to another business’ name.

Here are a couple of ways to see if your chosen business name is available:

  • Searching the internet.
  • Going through the databases of national names.

5) Registering your business name:

Unless you have initiated a sole proprietorship under your legal name, you will have to get your business name registered with the Canadian government. The registration process will depend upon your chosen province and business structure. For example, Ontario allows owners to use their legal names for their business.

The below guidelines, provided by the Canadian government, will prove helpful to you:

Corporation name:

All incorporated businesses will be required to get their business names registered from their incorporating jurisdiction. Federal incorporation allows exclusive corporate name use throughout Canada, while businesses incorporating territorially or provincially will be allowed to use their corporate names in the incorporating territory or province.

Trade name:

If you do not want to use your legal name as your business name, it will be considered a trade name and must be registered as such. Non-compliance can lead to legal consequences.

6) Getting familiar with the sales taxes in Canada:

A crucial part of operating a business is ensuring that the right amount of sales tax is being charged for your services or goods. Canada operates a two-tiered sales tax system:

a) Federal (GST):

This tax is applicable to pretty much every good and service supplied across Canada. Every business needs to get itself registered and incorporate either GST (Goods and Sales Tax) or HST (Harmonized Sales Tax). Only small suppliers, that is, suppliers having maximum taxable revenue of 33,000 CAD during the most recent four consecutive quarters, are exempt from charging this tax. However, small suppliers can opt for registration, after which, they will be obligated to collect GST.

b) Provincial:
i) Provincial Sales Tax (PST):

You will have to charge this tax on every good or taxable services, and is applicable in every province that has not harmonized the PST and GST. Tax rates vary from province to province.

ii) Retail Sales Tax (RST):

Manitoba’s PST is referred to as RST.

iii) Quebec Sales Tax (QST):

Every Quebec-registered business will need to charge a QST (and not a PST).

c) Harmonized:

Certain provinces have combined their PSTs and GSTs, and that combined sales tax is referred to as HST (Harmonized Sales Tax).

 Final Word:

Canada, with its thriving economy and educated population, is one of the most promising spots for starting a new business. We hope that this guide will help you through the process of setting up a business in Canada. For more help and information, please contact our team at www.aadmi.com

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